The Franchise Disclosure Document is a legal document that you usually will get in the course of looking into a franchise. By law, franchisors must furnish this document to prospective franchisees, and  this generally contains materiel information that will be important to the franchisee in assessing the franchise as a business opportunity. This document is usually packed very full of information, and each piece is a vital part of the overall picture that you need to make a more informed choice. Having this document and being aware of the parts of it is important. Here, we will go into the different parts of the Franchise Disclosure Document and what different changes are in this format for franchisees.

Franchise Disclosure Documents all follow the same format: The franchisor and any predecessors, litigation history, bankruptcies, the franchising fee and any other opening payments, any other fees involved, a statement of the investors initial cost, obligations to the franchisee to purchase from specific sources, obligations to purchase in accordance to standards, financing, obligations of the franchiser itself, designation of territory, trade marks, trade names, logo types, service marks and other commercial symbols, copyrights and patents, obligations of the franchisee to participate in actual operations, restrictions on goods and services,  Renewal, termination, repurchase, modification and assignment of the Franchise Agreement and related information, arrangements with public figures, actual, average, projected or foretasted sales, profits and earnings, information regarding the franchisers’ franchises, financial statements, contracts and lastly, an acknowledgment of receipt.

The FTC rules for franchises changed in 2007- and many people question the differences between the Uniform Franchise Offering Circular, or UFOC and the  FTC Franchise Disclosure Document, or FDD. It is important to bear in mind that the FTC does not require these documents to be filed, but that twenty six states require business opportunity disclosure filings, and thirteen states keep these on file. It’s generally advised that a franchiser give you this document at least fourteen days before you sign a franchise agreement- though the better advice is to be sure you are clear on it well before then.

As of  July 1, 2008 the new format became mandatory. Most people have discovered that franchise closings do go a great deal more smoothly since the change, and it certainly does make delivering the document via electronic means a great deal easier. However, the same rules apply as to this document as did the old- make sure that you have a qualified franchise attorney look it over, and if you have any questions about any part of the document, or anything said in it, always ask for clarification. It is vital that you are absolutely clear on the franchise agreement, and the FDD, more importantly, before you proceed so that you are completely understanding about what you are engaging in.